Imperfect match: 10-minute frenzy dictating trading days

That 10-minute window when the ASX closing bell rings is seeing the same sorts of volumes that would normally change hands during a six-hour trading day.

Share prices are jumping around up to 250 basis points during the 10-minute match at the end of the day. Louie Douvis

And when the buyer and sellers turn up at 4pm, they're materially moving share prices even though there is no new information to send prices up or down.

While it's a boon for trading desks clipping tickets like never before, traders are astounded by how prices have jumped around in the match over the past few weeks.

They're used to investors turning up on the match for all sorts of reasons – liquidity, not wanting to move the market while it's open and the like – but normally the buyers and sellers turn up in proportion with the rest of the day,

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Recently, though, that's not the case.

For whatever reason the buyers outweigh the sellers, or the sellers outweigh the buyers on any given day. And there can be almost as much price movement in the 10-minute match as the six hours preceding it.

Macquarie quant strategist Jason Scally has put some numbers to the anecdotal evidence.

He reckons the average movement for stocks in the All Ordinaries was 100 to 250 basis points in March. It's usually about 15 basis points, he says, which is roughly equivalent to average quoted spreads on the S&P/ASX 200. His analysis compared closing prices with a security's average trading price in the five minutes prior to the 10-minute match.

The big question is why.

Volatility may be part of the answer – although the last time volatility spiked in December 2018, price movements in the match didn't jump around much more than in normal conditions.

Scally reckons there are a few possible reasons for the recent movements, including derivative unwinds, hedging activity and ETF rebalancing, on top of more vanilla struggling to keep up during the trading day and instead focusing their trading activity at the close.

But it also seems to suggest that recent volatility and uncertainty, and the pace in which it has spiked, has resulted in temporary breakdown of an orderly process.

The next question is who's making money from it...

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Sarah Thompson has co-edited Street Talk since 2009, specialising in private equity, investment banking, M&A and equity capital markets stories. Prior to that, she spent 10 years in London as a markets and M&A reporter at Bloomberg and Dow Jones. Email Sarah at sarah.thompson@afr.com

Anthony Macdonald co-edits Street Talk, specialising in private equity, investment banking, M&A and equity capital markets. He has 10 years' experience as a business journalist and worked at PwC, auditing and advising financial services companies. Connect with Anthony on Twitter. Email Anthony at a.macdonald@afr.com

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